New pension system is ‘a boon’

Pension funds are expecting to be raided by cashstrapped employees who can’t wait for the new twopot pension payment system to be implement in March.

This new system has been seen as a breakthrough for the poor and those hardest hit by economic challenges in the last three years.

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In terms of the two-pot pension system, it will be possible for employees to access a third of their annual contributions to pension funds up to R30 000 while still employed.

An employee currently has to wait until retirement, resign or become unemployed before getting the pension payout. Organised labour and business differed on the implementation of the new system, with labour pushing for early introduction while business favoured a delay until 2025.

However, the standing committee on finance bowed to labour pressure to implement the system from 2024 instead of March 2025, a decision that has disappointed the pension industry.

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The country has been reeling under the weight of economic downturn, accompanied by the rising cost of living, exacerbated by regular interest rate and fuel price hikes.

This has affected various aspects and sectors of the country’s economy which were forced to cut costs. The Congress of South Africa Trade Unions (Cosatu) was among those organisations which lobbied for pension accessibility to be implemented quickly, first inspired by the impact of the Covid pandemic which caused many workers to lose their jobs.

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Subsequently, the general economic meltdown contributed to further suffering among those who lost their jobs, which prompted the call for a part payout of pension money to alleviate the situation.

Cosatu spokesperson, Matthew Parks believed the workers were drowning due to a struggling economy, with a 40% or more unemployment rate, rising cost of living and repo rate hikes.

It is envisaged the new set up will help boost savings in the long term because employees will only access a limited portion and not the entire pension fund.